Resist Selling Into Strength

I must admit, I was a bit perplexed by the number of people interested in selling Wednesday's strong rally. A day of unequivocal strength with the charts of several growth names saying, "Look at me: I'm ready to go higher," and it's time to sell?

From my vantage point, Wednesday was a day of institutional buying. Major averages broke out over key resistance levels in strong volume. The September highs are now within reach. The session opened with a bang, the market held gains smartly and the indices rallied strongly into the close.

Frankly, selling was the last thing on my mind Wednesday. In fact, I was doing the exact opposite and looking for opportunities to get long.

One hour after the close, Melissa Francis of kicked of CNBC's "Fast Money" program with the question: Were you a buyer or a seller of today's rally? Brian Kelly chimed in first: "We had a tremendous rally today. If you had any profits, you had to take them." Guy Adami added: "The S&P 500 will top out between the March 2000 high of 1527 and the October 2007 high of 1565 over the next one to one-and-a-half months. It could happen even sooner."

Why not go with the flow for now? I understand that most traders are in the business of hitting singles. Taking a few points of profit and moving on to the next trade. Singles are fine, but I'm more interested in home runs -- hitching on to an emerging leader in the early stages of a move and sitting tight. The big money is made by sitting tight and letting your winners run.

I've initiated five new long positions -- including two yesterday -- since Nov. 26 for my Ultimate Growth Stocks model portfolio. Instead of scalping them for several points of profit, I will sit tight with them because I know they have the potential to outperform nicely if new money continues to come in from the sidelines.

Ken Shreve got his start in the financial markets with Investor's Business Daily (IBD). He spent more than 10 years as an editor and columnist for IBD and its Web site Investors.com. He also acted as the Investors.com "Market Wrap" anchor and presented IBD investing workshops and seminars nationwide. He continues to provide market commentary on national radio and has appeared several times on CNBC. He now hosts the "Breakout Investing" podcast Monday through Friday from 3-4 PST on TFNN.